Standard Life Interim Results 2009 5 August 2009
Disclaimer This presentation may contain certain “forward-looking statements” with respect to certain of Standard Life's plans and its current goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements containing the words “believes”, “intends”, “expects”, “plans”, “seeks” and “anticipates”, and words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Standard Life's control including among other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the policies and actions of regulatory authorities, the impact of competition, inflation, and deflation; experience in particular with regard to mortality and morbidity trends, lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; and the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations in the jurisdictions in which Standard Life and its affiliates operate. This may for example result in changes to assumptions used for determining results of operations or re-estimations of reserves for future policy benefits. As a result, Standard Life’s actual future financial condition, performance and results may differ materially from the plans, goals, and expectations set forth in the forward-looking statements. Standard Life undertakes no obligation to update the forward-looking statements contained in this presentation or any other forward-looking statements it may make. 2
What we will be covering Group Overview Sir Sandy Crombie Financial Highlights David Nish Delivering value from an asset managing business Sir Sandy Crombie Questions Sir Sandy Crombie, David Nish and Keith Skeoch 3
Standard Life Interim Results 2009 Group Overview Sir Sandy Crombie
A distinctive approach to delivering value An asset managing business building valuable customer relationships with leading service and compelling propositions • Creating capital efficient innovative products • Opening new routes to markets • Leveraging investment management expertise and performance • Driving further operational excellence Driving shareholder value 5
Standard Life – strategy delivering • Solvency position remains robust • Strong capital and cash flow generation • New money flows resilient throughout the cycle • Selective approach to new business • Ongoing focus on efficiency • Well positioned for all market conditions A resilient business model 6
Standard Life Interim Results 2009 Financial Highlights David Nish
Financial summary H1 2009 H1 2008 Assets under administration 1 £156.5bn £156.8bn Life and pensions net flows 2 £0.7bn £1.8bn Investment management third party net flows £3.1bn £2.7bn New business IRR 16% 18% Embedded value operating profit before tax £348m £534m Return on embedded value (RoEV) 8.0% 11.0% IFRS underlying profit before tax £47m £345m EEV core capital and cash generation £167m £143m Embedded value per share 1 265p 286p FGD surplus 1,3 £3.1bn £3.3bn Dividend per share 4.15p 4.07p (1) Comparison is to 31 December 2008 (2) Excludes Asia (3) FGD surplus as at 31 December 2008 is stated after allowing for the final dividend On going resilience in volatile market conditions 8
Movement in assets under administration £3.1bn (£0.8bn) (£2.4bn) £0.9bn (£0.8bn) £0.4bn (£0.9bn) £0.2bn £156.8bn £156.5bn Europe Bank Market / other Closing Opening UK net UK legacy Canada net Standard Life Group AUA flows net flows flows net flows net flows Investments adjustments movements AUA (excl legacy) third party net flows Resilient net inflows 9
Delivering a capital-lite strategy 10 5.0% New business strain % 4.5% Europe 8 4.0% Canada 3.5% UK PVNBP £bn 6 3.0% 2.5% 4 2.0% 1.5% 2 1.0% 0.5% 0 0.0% H1 H1 H1 H1 2006 2007 2008 2009 (1) New business strain is calculated on a post tax basis. (2) H1 2006 NBS is shown on a pro forma basis. (3) New business strain margin for H1 2006 and H1 2007 have not been restated to include mutual funds as covered business. New business strain margin for H1 2007 and H1 2008 have not been restated for Sigma UKFS mutual funds. (4) H1 2007 and H1 2008 PVNBP have been restated to reflect the inclusion of Sigma UKFS mutual funds within UK. (5) H1 2006, H1 2007 and H1 2008 PVNBP have been restated to reflect the inclusion of the offshore business within Europe. Prior to 2009 this was included within UK. An increased focus on cash generation 10
Growing returns – capital-lite products H1 2009 H1 2008 Discounted PVNBP NBC NBC IRR Payback margin years % £m % £m Individual pensions 11% 10 0.7% 14 36 Group pensions 14% 11 1.9% 29 44 Institutional pensions >40% <3 0.8% 7 10 Annuities Infinite Immediate 17.8% 46 40 Savings and investments 4% N/A (0.6%) (4) 2 UK covered business total 20% 6 1.8% 92 132 Canada 14% 9 1.3% 18 18 Europe 7% 21 0.8% 4 7 Covered business total 16% 8 1.6% 114 157 (1) H1 2008 new business contribution has not been restated to include Sigma UKFS mutual funds. (2) H1 2008 has been restated to reflect the inclusion of the offshore bond business within Europe. Prior to 2009 this was included within UK. Strength of IRR demonstrates benefit of capital lite approach 11
Back book management H1 2009 H1 2008 UK Canada Europe HWPF Total Total TVOG £m £m £m £m £m £m Lapses - - (8) - (8) 2 Mortality and morbidity 3 9 1 - 13 (1) Tax 11 2 8 - 21 24 Other (10) (2) (9) 89 68 - UK annuity reassurance - - - - - 119 Total 4 9 (8) 89 94 144 TVOG benefit reflects model improvements and changes to asset allocations and hedging arrangements. A track record of extracting value from the back book 12
£247m Normalised H1 2008 IFRS underlying profit underlying profit (£31m) Impact of market volatility on Canada surplus assets and reserves £216m Normalised H1 2008 underlying profit (excl. Canada volatility) IFRS profits impacted by significant market volatility (£71m) Decreased management charges (£21m) Reduction in holding company profit (£9m) New business development (£12m) Asset impairments Decreased management £8m expenses (£13m) Other £98m Normalised H1 2009 underlying profit (excl. Canada volatility) (£21m) Impact of market volatility on Canada surplus assets and reserves £77m Normalised H1 2009 underlying profit £29m Reserving change on deferred annuities (£59m) Volatility following restructuring of global liquidity funds £47m H1 2009 underlying profit 13
Capital and cash generation H1 2009 H1 2008 £m £m New business strain (72) (131) Capital and cash generation from existing business 246 263 Covered business capital and cash generation 174 132 from new business and expected return Covered business development expenses (9) (10) Global investment management, banking and healthcare 23 38 Group corporate centre costs and other (21) (17) Core 167 143 Efficiency (8) (3) Back book management 29 110 Operating profit capital and cash generation 188 250 Non-operating items (139) (69) Total capital and cash generation 49 181 Strong coverage of new business strain 14
Embedded value Movement in embedded value per share Opening EEV per share 31 Dec 2008 286p Operating profit - post tax 11p (12p) Non operating profit - post tax Actuarial losses on pension schemes (4p) Foreign exchange movements (8p) Cash dividend to equity holders (5p) Other 1p Scrip issue (4p) 265p Closing EEV per share 30 June 2009 • A robust set of operating assumptions • A track record of extracting value from the back book • Fast monetisation profile of VIF – half monetises within 5 years (1) Closing EEV per share of 265p based on diluted share total of 2,212m. Scrip issue movement has been calculated as the impact of the issue of 32m of additional ordinary shares on the closing EEV of £5,859m. All other figures are based on diluted share totals of 2,180m. A conservative approach to embedded value 15
Financial Groups Directive FGD Surplus 31 December 2008 1 30 June 2008 30 June 2009 £3.5bn £3.3bn £3.1bn Sensitivity to equity market falls 2,3 Sensitivity to yields 2,3 Fall in equities FGD Surplus Rise in yields FGD Surplus 100bps rise in yields 20% (FTSE 3,399) £2.5bn £1.4bn (e.g. 4.12% to 5.12%) 30% (FTSE 2,974) £2.2bn 40% (FTSE 2,549) £1.4bn (1) FGD surplus at 31 December 2008 is stated after allowing for the final dividend. Assumed final dividend of £168m all taken in cash – since reduced to £110m due to high Scrip dividend take up. (2) Compared to 30 June 2009 (3) Based on assumed management actions appropriate to these stresses A resilient capital position 16
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